This paper highlights the overlap between private sector and the state in regulating the sustainability of palm oil industry in Indonesia through the presence of two different certification schemes: the voluntary, global market-driven Roundtable on Sustainable Palm Oil (RSPO) and the mandatory, state-driven Indonesian Sustainable Palm Oil (ISPO). Increasing demand from global consumers for proof of sustainability in the industry requires comprehensive supply chain traceability. Since product tracing in each certification scheme covers different phases of the long palm oil supply chains, there is an opportunity to improve traceability and cover the entire supply chain by harmonizing the certifications to better accommodate both Indonesian regulations and the global norms that regulate palm oil sustainability. Comprehensive traceability would benefit all industry stakeholders (government, companies, smallholders, and NGOs) in ensuring the sustainability of Indonesian palm oil products in the global market.
There are two key hurdles in making Indonesian palm oil industry more sustainable: land ownership status and legality, and transforming smallholders practice – and RSPO and ISPO have different ways of addressing these problems through their standards (or “Principles and
Criteria”). The existence of several different sets of official data, plantation practices in the country inherited from Dutch colonial culture, nationwide recognition of tanah adat/ulayat (indigenous land rights), and politicization and corruption in land acquisition are among the challenges facing land ownership recognition. Smallholders, who own or operate almost half of oil palm cultivated land in the archipelago, must also play an important role if the industry is to be transformedthrough certification. Although ISPO and RSPO have similar approaches to incorporating more smallholders in their certification schemes, their implementation on the field differs due to the ambiguous interpretations of each scheme’s standards.
This paper proposes several policy recommendations to the Ministry of Agriculture (MOA), primarily alterations to MOA Regulation No. 38/2020 on ISPO Certification to accommodate more independent smallholders, increase certification uptake, and make the standards more adaptable both to the local context of each palm oil producing region and to the global RSPO standards. Other recommendations include updating the ISPO-RSPO Joint Study; studying the feasibility of facilitating open access to data on oil palm concessions through public-private partnership with RSPO and third-party land monitoring systems; and reforming the way Palm Oil Fund Management Agency (BPDPKS) manages funds collected from the crude palm oil export levy, in order to financially support programs to improve the sustainable practices of independent smallholders, as mandated by President Joko Widodo.